Minister of Finance Jim Flaherty. Photo by
THE CANADIAN PRESS/Adrian Wyld

OTTAWA — Call it the Apple Pie Budget.

Following a year of abrupt and controversial reform, “Economic Action Plan 2013” emerged, as expected, as a relatively cautious affair — modest in its ambitions, conservative in its spending, with a great deal of language calculated to soothe and mollify irate taxpayers.

This puts the Harper Conservatives foursquare back where they began in the 2005-06 campaign — self-consciously prudent, centrist and relentlessly focused on winning retail votes. The plan contains some significant risks, particularly in the mid-to-long term. But as a political document it is clever indeed.

For starters, Finance Minister Jim Flaherty has quashed any remaining uncertainty about his determination to eliminate the federal deficit, currently about $26 billion, in time for the 2015 election. “Our government is committed to balancing the budget in 2015,” Flaherty said early in his speech to the House of Commons. “Period.” That will comfort fiscal hawks in the Tory caucus who have long insisted the plan to return to balance in this mandatemust be ironclad, and who were overruled last year.

Achieving this, if the budget plan can be believed, will be relatively painless. Savings are to accrue from measures that will be familiar to anyone who has worked through an organizational downsizing: a five-per-cent, $42.7-million reduction in public-service travel costs “through the use of technology,” consolidating computer purchases, more efficient use of websites, and the like.

Canada Revenue Agency is expected to trim $60.6 million from its budget by fiscal 2015-16, by reducing “management administrative support” and leveraging “increased public use of automated tools to reduce spending on information technology.” It will achieve this, the budget book promises, while closing tax loopholes, to the tune of $316 million this year and $806 million next. Fisheries and Oceans Canada is to sustain a cut of $33 million in 2015-16, through measures such as “reducing management overhead.”

In the one significant restructuring here — unmentioned in the budget speech — the Canadian International Development Agency is being merged with the Department of Foreign Affairs and International Trade. This will further fuel the narrative, beloved of the Harper government’s critics, that Canada no longer cares about helping the poor overseas. But set against thebouquets thrown to Main Street, that is unlikely to cause more than a ripple of discontent.

Front and centre is the “new Canada Job Grant,” a plan to fund skills training to the tune of $15,000 per worker, assuming an employer kicks in $5,000, with the province and feds equally sharing the other $10,000. Next is the “new Building Canada Plan,” a 10-year, $53-billion blend of “new and existing funding” to renew roads, bridges, subways and other public infrastructure. Finally there’s $1.4 billion in targeted manufacturing tax relief and modest spending on innovation and economic development.

All this is to be effected, like the savings, in the stingiest of fashions, relatively speaking: Total program spending for 2013-14 will be $252.9 billion, less than a $2-billion rise from last year’s $251 billion. But operating spending actually drops this year, from $80.5 billion to $76.5 billion. The budget contains the smallest increase in discretionary spending, Flaherty noted in his speech, in nearly two decades. This is the Conservatives, reveling in being conservative.

The devil, as always, is in the detail: the Job Grant has yet to be negotiated with the provinces, and will not be introduced until 2014-15; the 10-year infrastructure plan, like all such long-term plans, isback loaded; and the entire edifice assumes that the tepid global economy won’t slip back into recession. In the year of projected return to a balanced budget, fiscal 2015-16, the estimated surplus is a mere $800 million. That is, relatively speaking, a rounding error.

Meantime, downside risks are substantial: They include a weak recovery in the United States, continuing economic turmoil in Europe, and soft Canadian crude oil prices, due to the so-called bitumen bubble. There appears to be at least a tacit assumption that U.S. President Barack Obama will approve the Keystone XL pipeline project: “Looking forward, analysts expect the gap between Canadian prices and global benchmarks to gradually narrow towards historical norms, reflecting expectations of additional north-south pipeline capacity in the United States.”

That, of course, remains to be seen. Hence, the political risk: If, come 2015, revenues are even weaker than expected, the Tories may need to impose draconian cuts to keep their balanced-budget promise — or break that promise. Neither option will be palatable in an election year. Flaherty insisted the prospect doesn’t worry him. But two years is a long time.

In that sense, it’s apple pie — but with prayer as the secret ingredient.

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